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Trump health pick Tom Price pressed over purchase of shares in ASX-listed biotech Innate

The likely new US health chief got a privileged offer to buy discount Aussie shares, contrary to his congress testimony.

Tom Price faced the US Senate Finance Committee last week. Pic: AFP
Tom Price faced the US Senate Finance Committee last week. Pic: AFP
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US Republican politician Tom Price got a privileged offer to buy an Australian biomedical stock at a discount, the company’s officials said, contrary to his congressional testimony this month.

The man tapped by President Donald Trump to be secretary of the Department of Health and Human Services testified in his Senate confirmation hearings on January 18 and 24 that the discounted shares he bought in Innate Immunotherapeutics (IIL), an Australian medical biotechnology company, “were available to every single individual that was an investor at the time”.

In fact, the cabinet nominee was one of fewer than 20 US investors who were invited last year to buy discounted shares of the company — an opportunity that, for Mr Price, arose from an invitation from a company director and fellow congressmen.

The shares were discounted 12 per cent off the traded price in mid-June only for investors who participated in a private placement arranged to raise money to complete a clinical trial. The company’s shares have tripled since the offering.

A spokesman for Mr Price didn’t respond to requests for comment and referred to earlier statements issued by Mr Price’s spokesmen. Mr Price previously has said he has done nothing wrong and that he disclosed all his trades.

The details of Mr Price’s share purchase have drawn questions during his congressional hearings because they could indicate whether he received preferential treatment based on a congressional connection and wasn’t the average investor he has portrayed himself to be.

Tom Price, right, at his confirmation hearing.
Tom Price, right, at his confirmation hearing.

Mr Price — whose confirmation to be health secretary depends on a vote in the Senate Finance Committee, scheduled for tonight (AEDT), and then the full Senate — said he learned of the company from his friend, Republican Chris Collins, a company director and its largest shareholder.

At Mr Collins’s invitation, Mr Price in June ordered shares discounted in the private placement at 18 cents apiece, and then more in July at 26 cents a share, Mr. Collins said in an interview. Those orders went through in August, after board approval. Mr Price invested between $US50,000 and $US100,000, according to his disclosure form.

After reaching an all-time high of $1.77 on the Australian stock exchange last week, the stock closed at 78 cents yesterday.

The discounted stock offer in Innate Immuno, as the company is known, was made to all shareholders in Australia and New Zealand — but not in the US, according to Mr. Collins and confirmed in a separate interview with Innate Immuno CEO Simon Wilkinson.

Testifying before the Senate Health, Education, Labor & Pension Committee, Mr Price said his arrangement wasn’t a “sweetheart deal.”

He said he paid the same price as other investors in the private placement but didn’t say that the 12 per cent discount wasn’t available to ordinary investors or that he was one of a select few who were invited to participate in the deal.

Democrat senator Al Franken pressed Mr. Price on the point, reminding him that they had discussed it in Mr Franken’s office. “I find it absolutely amazing that you responded that you did not know that you got a discounted price,” Mr. Franken said. “That is absolutely amazing because we discussed this.”

Mr Price responded: “By definition, I believe that’s the nature of a private placement offering. What I’ve said to you and what I’ve said to others is that I paid exactly the same price as everybody else.”

Innate chief Simon Wilkinson
Innate chief Simon Wilkinson

Mr Wilkinson said investors who had bought in a previous private placement were called to “make friends and family aware of the opportunity ... We are always looking to increase our shareholder base. But those new parties have to meet the definition of sophisticated financial investor.”

Only six US investors, including Mr Price, fell into the friends-and-family category, Mr Collins said. About 10 more US investors were offered discounted shares by the company because they had previously been invited to partake in private placement offerings.

A limit was placed on investors in Australia and New Zealand — for every nine shares owned, they were permitted to purchase one more — but these limits didn’t pertain to investors in the US. The limits had to do with Australian securities laws, Mr Wilkinson said. Six hundred out of 850 active investors in Australia and New Zealand took advantage of that offer, Messrs. Collins and Wilkinson said.

The private placement raised money to complete a clinical trial for the company’s only product, a drug to treat secondary progressive multiple sclerosis. There is no current approved drug therapy for this advanced form of multiple sclerosis, though Novartis also has a drug in advanced trials.

Messrs. Collins and Price said they have publicly disclosed their trades as required under the 2012 Stop Trading On Congressional Knowledge (STOCK) Act, which aims to prevent members from using political insider information to make stock gains. Democrats have called for the Securities and Exchange Commission to investigate Mr. Price’s trades under the STOCK Act.

Both congressmen have played key roles writing healthcare legislation, including the 21st Century Cures Act, sprawling legislation that included major provisions regarding the Food and Drug Administration’s regulation of drugs and devices. Mr Collins wrote legislation that would have permitted the FDA to speed up trials for new drugs.

Mr Collins, a member of the health panel of the Energy and Commerce Committee, acknowledged provisions of that legislation could eventually affect Innate Immuno, along with all drug companies.

Mr Price has traded more than $US300,000 in shares of health-related companies since 2012, while on the House Ways and Means Committee’s subcommittee on health and while writing and voting on healthcare legislation that could affect the shares of those stocks, according to an analysis by The Wall Street Journal. He plans to divest his healthcare and other corporate stockholdings within 90 days of his confirmation, he said in a letter to the Office of Government Ethics before his confirmation hearings.

Mr Collins said he recruited early US investors in Innate Immuno’s stock, many of whom are his family and friends from western New York.

Those investors who had participated in earlier private-placement rounds were invited to invest again at a discounted price last year. This offer didn’t extend to every US investor who owned shares at the time, as Mr Price suggested it did at two congressional hearings.

Indeed, Mr Price wasn’t in line to buy shares in the last private placement because he hadn’t previously participated in private fundraising rounds, according to Messrs Collins and Wilkinson.

Mr Price first invested in the company a year ago, buying shares through the open market on the Australian exchange. He learned about the company from Mr. Collins, who holds a 17 per cent stake in it.

Mr Collins said Mr Price is “one of my friends” and that he sits “next to him” on the House floor. After discussing the company, he said Mr Price did research and later bought $US5,632 in shares. Then in the (northern) summer, Mr Price got in on the discounted sale after Mr Collins filled him in on the company’s drug trial, according to Mr. Collins.

Mr Collins said he told Mr Price of the additional private placement. He said Mr Price asked if he could participate in it. “Could you have someone send me the documents?” Mr Collins recalled Mr Price asking him.

Senate Republicans said they are optimistic about Mr Price’s confirmation.

Dow Jones Newswires

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Original URL: https://www.theaustralian.com.au/business/trump-health-pick-tom-price-pressed-over-purchase-of-shares-in-asxlisted-biotech-innate/news-story/792bf07443e24aa44a0036b9fe7be5b1